The most recent victim of Canada’s unexpected cannabis industry is Tokyo Smoke, which announced it would shut down several locations and seek creditor protection. The sector is grappling with a deficit of stores, higher overhead costs, and rock-bottom wholesale rates.
Following the legalization of marijuana in 2018, one of Ontario’s pioneer brands, Tokyo Smoke is closing down 29 shops and restructuring under the Companies ‘ Lenders Arrangement Act, leaving 167 places open across four regions.
Matt Maurer, companion and head of the Cannabis Law Group at Torkin Manes LLP in Toronto, noted that it’s both amazing and predictable. People might be shocked to see a well-known brand seeking creditor protection, but those in the market are n’t.
Many cannabis retailers and suppliers in Canada have filed for bank protection or closed over the past few years, frequently struggling to meet their income obligations.
Maurer points out that the variety in the market—with large chains, mom-and-pop shops, single-store owners, and those with many stores, including franchises—creates a complex environment.
In Ontario, Canada’s largest controlled plant market, companies primarily raced to grow rapidly to capture market share. That was the right course of action at the time.
However, these businesses face stiff opposition from a strong black market. Duncan Fox, a senior analyst for Bloomberg, noted that the illegal cannabis market continues to be a major obstacle to price increases as a result of fierce competition.
Tokyo Smoke’s processing acknowledged this problem, citing the thriving illegal market as a component hurting income. Between$ 2 billion and$ 4 billion is thought to be the illicit market’s estimated value.
Considering all these factors—intense competitors, falling charges, and higher-than-ideal overheads—it puts considerable strain on many businesses, as Maurer explains.
Fox’s June report projected modest growth for the Canadian cannabis market, estimating it could reach$ 4.8 billion in 2024, driven mainly by new products like vapes, edibles, and beverages. However, retail prices for regulated products have dropped nearly 30 % since 2018, squeezing producers.
Monthly recreational cannabis sales peaked at$ 469 million in August 2023, but growth has slowed, with June 2024 sales reported at$ 405 million, according to Statistics Canada.
Ontario first introduced a lottery method for cannabis shops in 2018 to maintain source, before switching to an empty market in 2020. This change led to a jump of new hemp companies, some overpaying for contracts, according to Maurer.
Store owners often did n’t know where competitors were setting up during the licensing process, leading to overcrowding. A sizable number of stores opened in a short time, maybe right across the street from each other.
Despite the challenges, cannabis legislation recommend Neev Tapiero remains positive about the company’s future in Canada and worldwide. The legal structure for hemp, though flawed, is better than the illegal system.
Canada may function as a situation study—good or bad—for other states considering national cannabis legislation.
More than two-thirds of Canadians who used marijuana in the last year were able to purchase it legitimately, according to a Statistics Canada study from April.
As the economy evolves, Tapiero predicts another growth, especially if the U. S. moves towards legislation. Great names like Marlboro and Budweiser may enter the market, causing a new trend. Therefore, the dust will live again.
